Gas still vital in energy mix

October 2nd, 2015

Australia’s biggest energy company, AGL, found itself in a ‘reflective’ mood at its annual general meeting in Melbourne this week.

Having spent three hours patiently fielding question after question from micro- stockholders attending to broadcast their own personal agendas, AGL chairman Jerry Maycock posed a question of his own: where are we supposed to get our future energy from?

Speaking at the company AGM in Melbourne, Mr Maycock said:  “Today we’ve heard criticism of coal, coal-seam gas, wind turbines, solar subsidies and batteries.  If we accept all these objections, we have to ask ‘Where DO we get our energy from?”

Indeed.  As Australia’s biggest energy company, AGL has invested in just about every economic option – including some which are economic only because of Government subsidies.

AGL has simultaneously invested in coal as an energy source and committed to closing down coal-fired electricity generation over time.  It is doing whatever it can to embrace renewable energy.

But that does not mean it is unaware of the costs involved – and the potential consumer impact of any attempt to make a sudden transition to renewables as the primary source of energy for Australia.

Trying to move too quickly into renewables would cause “immense and unaffordable cost” for consumers, Mr Maycock said.

The reason for that is well understood by economists and engineers the world over, even though many anti-fossil fuel activists refuse to accept it.

The truth is that despite recent technological advances in solar and battery technology and innovations in wind power, the two most prevalent forms of renewable energy, wind and solar, are still multiple times more expensive than coal and gas.  And they operate intermittently – about 25% of the time in the case of wind.

This makes the economics difficult.

Until technology improves significantly, the business case for significant investment in baseload electricity generation remains extremely difficult, in the absence of major taxpayer subsidy.

The most recent example of this is the two new solar electricity plants commissioned by the Federal and NSW Governments.  These were government funded to the tune of $220 million – half of the project cost.

Over the years, a total of $18 billion has been  invested by Governments and private enterprise in wind power, to deliver about 3% of total energy consumed.

What this tells us is that progress to the 100% renewable energy future is slow and expensive.  It means that gas needs to be part of the mix on the road to the future – it is available and affordable and is much better in terms of carbon emissions.

But don’t expect a constructive approach from the anti-fossil fuel activist community  – they are still promoting the fiction of a transition to 100% renewable by 2030, at the laughably low cost of $10 billion.

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